Check out Graham Summers' perceptive SEEKING ALPHA post, "The Mainstream Media Still Doesn't Get The ECB Greek Debt Swap".
Summers' most cogent point relates to the "seismic" consequences of the ECB's immunizing their portfolio of Greek debt against loss, at the expense of private holders of same:
The global sovereign bond market is roughly $40 trillion in size. And the ECB just sent a message to all bond fund managers and private financial institutions that their Euro-zone sovereign bond holdings are not only the only holdings that are “at risk” for debt restructuring, but that ECB can change the rules at any point it likes.
This instantly and immediately makes Euro-zone bonds far less attractive to private investors. It was bad enough that the idea of a 50+% haircut on a sovereign bond was on the table. The only reason private Greek bondholders were willing to stomach this was in order to avoid a default/ catastrophe and the total loss of capital.
However, now all private bond investors know that not only will they be shouldering all of the losses during any upcoming sovereign defaults/ debt restructurings but that the ECB can change the rules any time it likes. Indeed, the only reason the ECB was able to get away with this without causing private bondholders to flee European sovereign debt en masse was because it didn’t take a profit on the debt swap.
In terms of Europe’s ongoing debt Crisis, this move is extremely damaging to any hopes of clean debt restructuring for Greece or the other PIIGS countries (Portugal, Ireland, Italy, and Spain). Remember, this entire round of the Euro Crisis was caused by concerns over 14€ billion in Greek debt payments that were due March 20th.
So what happens once we get into the hundreds of billions of Euros’ worth of sovereign debt that needs to be rolled over in the coming months. The ECB, IMF, and EU have already spent 176€ billion trying to prop up the PIIGS bond markets. What happens now that private bondholders know that any potential restructuring of sovereign bonds for these countries means them taking a large hit while the ECB doesn’t suffer a cent in losses?What's the endgame ? Summers believes that Greece will sink--or rather be pushed--further into depression and debt, until Germany forces Greece out of the Euro or Germany itself abandons the common currency, and that's just for starters.
For more illuminating articles on this subject, check out Felix Salmon's "The Epistemics Of Greek Default" and Paolo Santos' "'Voluntary' Greek Debt Swap Creates Several Troubling Precedents ".
Right now, you might be asking yourself, just how did Greece evade EU debt controls ? It was greatly helped--and simultaneously roundly rogered--by Goldman Sachs. For the gory details, see the Bloomberg online article, "Goldman Secret Greece Loan Shows Two Sinners as Client Unravels" by Nicholas Dunbar and Elisa Martinuzzi.